Miller v. Bank of America 11/20/06 CA 1/3

State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: A110137

Case Date: 03/21/2007

Preview:Filed 11/20/06

CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE

PAUL MILLER et al., Plaintiffs and Appellants, v. BANK OF AMERICA, NT & SA, Defendant and Appellant. (San Francisco County Super. Ct. No. 301917) A110137

Does a bank act illegally if when balancing customer accounts, it applies credits for Social Security benefits and other public benefit payments directly deposited to its customers' checking accounts to cover debits for overdrafts and overdraft fees? In Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352 (Kruger), the California Supreme Court prohibited a bank from utilizing the banker's setoff against public benefits to recover on an account holder's delinquent but separate credit card account. In this case, the trial court applied Kruger to prohibit the defendant Bank of America from collecting for overdrafts and fees by debiting directly deposited Social Security and other public benefit payments. This application of Kruger is an extension of its holding that is unwarranted in light of significant differences between the banker's setoff addressed in Kruger and the facts of this case. Accordingly, we reverse the judgment. BACKGROUND Representative plaintiff Paul Miller receives Social Security disability benefits directly deposited into his Bank of America (the Bank) checking account. In January 1998, the Bank mistakenly credited $1,799.83 to his account. When the Bank discovered its error, it reversed or "charged back" the credit to Miller's account and he was substantially overdrawn. When Miller's May 1998 Social Security payment was directly 1

deposited, it was automatically balanced against the larger overdraft to reduce his negative balance. When Miller discovered his account balance was negative, he complained to the Bank's local branch. In response the Bank opened a new account for his Social Security benefits, while leaving the negative balance in the old account, reversed the debit against his May 1998 Social Security payment, and deposited the resulting balance into the new account. But on two later occasions, the Bank again debited Miller's Social Security benefits to reduce the negative balance in his old account. Each time, after Miller complained, the Bank reversed the debits and restored the funds to Miller's account. Miller's first amended complaint included causes of action for intentional and negligent misrepresentation, intentional infliction of emotional distress, unlawful levy against Social Security benefit payments (Code Civ. Proc.,

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